MEAT, POULTRY & SEAFOOD
What food firms need to know about
meat and poultry recalls When food firms face a meat or poultry recall, several factors determine how that recall affects the firm’s bottom line.
A
recent Kansas State University study used stock market prices to determine costs of recalls to food firms and what recall factors are most impactful economically. Food safety is top of mind among many consumers and producers of food. It is also a continuum, because the more a food firm spends on effective technologies and protocols to ensure safe food, the greater chance the foods are protected against contamination. Despite a blanketed desire to keep foods safe, eventually food firms reach a price point - a limit they can spend feasibly to ensure staying in business and giving consumers an affordable product, said Ted Schroeder, professor of agricultural economics at Kansas State University. “The more a company knows about the anticipated impact of a recall event, the better it can make a decision about adopting new food safety protocols, new technologies or new surveillance methods to reduce the probability of a food safety breach,” Schroeder said. Schroeder, along with Veronica Pozo, assistant professor of applied economics at Utah State University, recently found that when food firms face a meat or poultry recall, several factors determine how that recall affects the firm’s 28
bottom line. The most impactful factor is the class of the recall, which determines if a severe human health hazard is involved. Other factors include the size of the recall, size of the firm, if the firm has prior experience dealing with a recent recall and the media coverage surrounding the event.
A close look at publicly traded food firms The researchers examined meat and poultry recalls that took place between 1994 and 2013, based on availability of recall data from the US Department of Agriculture’s Food Safety and Inspection Service (FSIS). The FSIS showed more than 1200 meat and poultry recalls happened during that time, and 163 of those recalls came from 31 different publicly traded firms. Although 163 of more than 1200 recalls may seem like a small number, publicly traded firms accounted for almost half of the total meat and poultry products recalled, said Pozo, who was a K-State doctoral student when the research was conducted. In fact, 277 million out of 638 million total recalled pounds, or 43%, came from publicly traded firms. Although it’s difficult to obtain financial data from firms and measure total direct costs and losses of revenue from a recall, price reactions in the stock market surrounding a
This issue is sponsored by – Reed Exhibitions – http://www.agriworldaustralia.com.au